> The SCFP, as a statement of financial analysis, demonstrates changes in funds (net working capital. cash and total resources) over a period of time, generally between two consecutive years.
> The SCFP, based on net working capital concept, is more popularly known as funds flow statement. According to this basis, only those transactions which bring about changes in net working capital are included in the statement while others are excluded, The statement enumerates major sources and uses of working capital.
> The major sources of working capital are funds from business operations, non-operating incomes, sale proceeds of fixed assets, raising additional share capital and long-term borrowings, The principal uses of working capital are purchase of fixed assets, repayment of long term borrowings, redemption of preference shares/debentures, payment or dividends, and so on.
> The SCFP, based on cash concept of funds, is commonly referred to as the cash flow statement. In the preparation of such a statement all the items that increase/decrease cash are included but all those items which have no effect on cash are excluded, Hence, it is essentially a tool of short-term financial planning.
> The preparation of cash flow statement (as per AS-3, revised) is mandatory for all the listed companies or for those enterprises which have turnover of more than Rs 50 crore in a financial year. Such a statement shows the sources and uses or cash into three components: (i) operating, (ii) financing and (iii) investing activities. The major operating items are cash receipts from sale of goods and rendering of services, and cash paid to suppliers and employees; financing activities include (i) issues or long-term liabilities and their redemption/repayment and (ii) payment of dividends and interest to shareholders and debenture holders/ lenders respectively; purchase of fixed assets, proceeds from sale or fixed assets and interest/dividends received from investment are the principal items related to investing activities, The cash flows from each of these categories are to be reported on a net basis. The statement highlights the extent of finances available from operating and financing activities to cater to the investment requirements of an enterprise, so. The SCFP, based on the resources concept of funds, is the most comprehensive and appropriate basis of measuring the changes in the financial position, Unlike funds-flow statement, the statement based on total resources does not exclude major financing and investment activities such as purchase of assets by new issue of shares and debentures, conversion of debentures, etc. which do not affect working capital. Thus, all financial resources concept is the best approach to disclose the changes in the financial position of a firm among the three alternative concepts of funds.